The Grand Betrayal has Arrived
Bill Black: President Obama’s bargain with Republicans opens the door to Wall St.’s dream – the privatization of Social Security.
PAUL JAY: Welcome to The Real News Network.
I'm Paul Jay in Baltimore. And welcome to
this edition of The Black Financial and Fraud
Report with Bill Black.
Bill's an associate professor of economics
and law at the University of Missouri-Kansas
City. He's a white-collar criminologist, a
former financial regulator, and author of
the book The Best Way to Rob a Bank Is to
Thanks for joining us again.
BILL BLACK: Thank you.
JAY: So you've been predicting this. So tell
us what this is.
BLACK: Well, what the viewers don't know is
that you chided me before we began, saying,
you didn't get this one right, you were predicting
a grand betrayal, and this is the ultra-grand
betrayal. And I agree that you have some,
you know, facts on your side in exactly that.
Bob Reich did a column in which he said, what
in God's name is going on? I mean, even the
Paul Ryan budget doesn't call for these kinds
of cuts in Social Security. Why do we have
a Democratic president trashing the crown
jewel of Democratic policies that has been
spectacularly successful in improving the
nation, in transforming old age from what
it used to mean, which was grinding poverty
for enormous numbers of Americans and literal
cat food diets and such, and into a situation
where people can live lives that are full
of greater meaning and value? And it's the
most popular program.
JAY: So do we know just what–do we know what
this bargain is? What does he want to do to
BLACK: Well, we have to wait because it delayed
again in the actual details. But they've leaked
and leaked and leaked, and it's what they
claimed, you know, that they're going to do
so-called chained CPI–and that's consumer
price index. And all of this is going to substantially
reduce over time Social Security benefits.
And Social Security benefits are already far
too small for a number of working-class Americans
when they retire. So it is a terrible policy.
JAY: It's also a double, triple whammy for
retired people. I mean, interest rates are
so low that your savings aren't earning anything.
It's likely your house has depreciated. And
so you–senior citizens are getting hit, like,
from all directions.
BLACK: And the biggest whammy in addition
to all of that is this is yet again Obama–it's
now–we're up to the fifth act of austerity.
Now, this is staring in the face of Europe,
which has been thrown back into recession,
except that most of Europe has been thrown
back into Great Depression levels of unemployment.
Even places like France have unemployment
rates now that are in excess of the best estimates
we have for the average rate of unemployment
during the Great Depression. And the periphery
of Europe is at levels that are probably three
to four times as large as what the wealthier
nations of Europe experienced during the Great
Depression in terms of unemployment levels.
So we know that austerity is the stupidest
conceivable policy, most self-destructive.
We are not shooting ourself in the foot; we're
shooting ourselves at least in the leg, and
maybe in the stomach in all of this. And Obama
didn't have to do it. Absolutely didn't have
to do it.
And the leaks are calculated and show that
it's exactly what we warned in terms of motive.
So the leaks are about how the president is
taking a political risk of alienating his
base and upsetting progressives. Well, he
deliberately wants to upset progressives.
Obama runs against the Democratic wing of
the Democratic Party. His hostility for it
is palpable. And he has long expressed this
desire to begin to unravel the safety net.
And why? Because of his legacy. And they are
open about this in terms of their press flaks,
that they believe that President Obama's place
in history will come because he had, as they
claim it, the political courage to go against
the interests of his own party, the interests
of the American people, and to begin to create
Wall Street's greatest dream, the unraveling
of the safety net of Social Security and its
eventual replacement by private investment
accounts that are going to lead to Wall Street.
JAY: Now, President Obama's defenders will
argue that he's going to get a tax increase
on the wealthy, and that without this kind
of a compromise, you could never get the tax
BLACK: Well, a further tax increase on the
wealthy would be the sixth act of austerity.
So, I mean, this is completely insane as a
matter of economics. Right?
So the first thing they did way back, a couple
of years ago, was to dramatically cut the
growth of federal spending at the worst possible
time, during the Great Recession. And, of
course, as we're speaking, the employment
numbers have just come out late last week,
and they are horrific. And what we've seen
over the entire course of the Great Recession
is that essentially all of the reduction in
the unemployment rate was produced by people
withdrawing from the labor force because they're
so discouraged about working.
So this is a catastrophic failure of a recovery.
Why? Because they began first with a stimulus
program that was dramatically too small and
poorly oriented through the–primarily through
bad tax cuts, badly designed tax cuts. And
then they've added to that austerity of their
overall plan with the deal they made on the
so-called fiscal cliff. And then they added
to it by reimposing the entire payroll tax
deduction. And then they added to it on the
tax for the wealthy. And then they added to
it in the deal they just did on sequestration.
And now they're going to add to austerity
as part of this deal. And supposedly this
is going to lead to Republican compromises–which,
by the way, there's absolutely no promise
of that–that would produce a sixth shoe dropping
in favor of austerity.
JAY: Now, Bill, you keep saying that the tax
on the wealthy is another measure of austerity,
but it depends what you do with the tax revenue.
BLACK: No, it doesn't.
JAY: Well, if you take the revenue and use
it for stimulus, it's not an austerity [crosstalk]
BLACK: There is no plan to do that. I mean,
stimulus is not I have a particular program.
Stimulus is the macroeconomic number, how
much are we spending. And the answer is: he
is proposing net significant reductions in
social spending and tax increases. Both of
those things are acts of austerity. So, no,
there is no offset.
JAY: But I'm saying he may not be using that
way, but we know the wealthy do not spend
even a fraction of their wealth. It doesn't
circulate. So if you tax it and then you use
it for keeping more teachers or whatever,
give more subsidies to cities or states, that's
more like–that would not be a measure of
BLACK: You could, of course, have a completely
different program than Obama has.
JAY: No, I'm hearing you that they don't do
that. I'm just saying taxing the wealthy isn't
inherently an austerity plan.
BLACK: No, no. But no one has said that. What
we're saying is in the circumstances we find
ourselves today, if what you do net is increase
taxes–and remember, the increase in taxes
was–the dramatic increase in taxes was on
working-class Americans. That's what the payroll
tax–that is our most regressive tax in all
of America. And Obama didn't even try to say
that, as a matter of official policy. And
that has had very substantial effects already.
I mean, there were already estimates by economists
that that would all by itself take away a
half percentage point of growth. And as I
said, it's not alone. It is the death of these
continuing cuts, the imposition of greater
and greater austerity.
JAY: But the argument you'd get from President
Obama's supporters, I think, or from President
Obama, is that he agrees with this idea that
in the long term Social Security's not sustainable,
that the population's getting older, and while
Social Security's supposed to pay for itself,
they show you this graph that, you know, eventually
it doesn't, and so on. So doesn't there need
to be some kind of reform, they would say?
BLACK: No. There is no crisis in Social Security.
And Social Security doesn't pay for itself
in that fashion in any event.
The question is: can we afford as a society
to make good on the promises of Social Security?
And the answer is: yes, and we can do so with
relative ease. And, of course, one of the
particularly easy ways would be to stop invading
people, which costs massively greater than
But in any event, in the current circumstances,
funding Social Security, given the fact that
we have a sovereign currency, would have no
effect in causing any of these problems, and
it would actually–if we increase Social Security
benefits for the people who are poorest, which
would be an excellent thing, again we would
spur the recovery and we would make the Social
Security funding system even sounder because
we would have greater income.
But we should not continue to tie Social Security
to a pay-as-you-go idea based on the most
regressive tax in America. That is an obscenity,
and a Democratic president should understand
that. I guarantee you that the economists
talking to him understand that.
And again what's really going on, as you've
mentioned, is there is a Wall Street wing
of the Democratic Party. This is the Bob Rubin
and such. And their goal–I mean, they're
clear about it. They want ultimately to privatize,
or at least largely privatize Social Security.
And that is the greatest dream and Christmas
present you could ever give to Wall Street,
'cause then you'd have all these private accounts
that they would manage, and they would get
massive fees measured in the hundreds of billions
of dollars over, you know, decade type of
thing, and they are all salivating. And they
don't just sit in a corner and salivate; they
spend money, they spend time with reporters
and such, and they create this fiction of
a crisis in Social Security. And indeed they've–you
know, we have talked to students all the time.
They have successfully scared large numbers
of students into believing that they're never
going to see Social Security, which is ridiculous.
All we need to do is maintain the political
defense. But to do that, of course, the president
should have been out there praising Social
Security, rather than picturing Social Security
and Medicare and Medicaid and food stamps
as the problem. If we did not have those four
programs, the United States would have been
thrown back into something very akin to the
Great Depression. And the amount of human
misery at this point, we would literally have
people starving to death in America on a frequent
JAY: Alright. Thanks for joining us.
BLACK: Thank you.
JAY: And thank you for joining us on The Real
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